Here’s why you should hold onto DaVita (DVA) stock for now.

DaVita Inc. DVA is gaining traction in the MedTech space with continued efforts to modernize services, global expansion initiatives, and acquisitions. However, integration risk remains a concern.

The stock currently has a Zacks Rank #3 (Hold).

Price performance

DaVita shares gained 5.3%, compared with the industry’s gain of 6.5% year-over-year. Meanwhile, the S&P 500 Index rose 14.2% over the same period.

What scares stocks away?

In terms of business strategy, DaVita has been growing through acquisitions of dialysis clinics and other businesses. The company has also benefited from entering into joint ventures and new business models. This, in turn, could adversely affect operating results, debt-to-capital ratio, capital expenditures and other aspects of the business.

DaVita strengthening factors

DaVita remains committed to expanding into international markets. Over the past few years, the company has strengthened its position in the emerging and developing markets of Brazil, China, Colombia, Germany, India, Malaysia, the Netherlands, Poland, Portugal and Saudi Arabia through strategic alliances and acquisitions of dialysis centers.

These strategic efforts are expected to help DaVita provide more effective patient care. The company is currently looking to expand into major European and Asian countries through acquisitions and partnerships.

The company generated international operating income of $1 million in its most recently reported quarter and continues to expect positive adjusted operating income for the rest of 2019.

In the United States, DaVita has recently seen strong demand for dialysis services. The company’s key business strategy is the prudent acquisition of dialysis centers and companies that own and operate dialysis centers and other ancillary services. These initiatives helped significantly improve financial performance over the long term.

In addition, DaVita issued impressive guidance for 2019. The company now expects adjusted operating income of $1.64 billion to $1.70 billion. This reflects significant growth from the prior range of $1.54 billion to $1.64 billion.

Where are the estimates heading?

For 2019, the Zacks Consensus Estimate for revenues is $11.35 billion, suggesting a year-over-year decline of 0.5%. For adjusted earnings, the same figure is $4.78, implying a year-over-year improvement of 33.9%.

Key choices

Higher-ranked companies in the broader medical space include Nissan Chemical Corporation NNCHY, Fresenius Medical Care AG & Co. KGaA FMS and McKesson Corporation MCK, each currently sporting a Zacks Rank of #2 (Buy). You can see complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Nissan Chemical has a long-term earnings growth rate of 10%.

Fresenius Medical has a long-term earnings growth rate of 5.9%.

McKesson has a long-term earnings growth rate of 6.9%.

Today’s Top Zacks Stocks

Would you like to see updated picks for our top market beating strategies? From 2017 to 2018, while the S&P 500 gained +15.8%, our five screens returned +38.0%, +61.3%, +61.6%, +68.1% and +98.3 %.

This improved performance is not a recent phenomenon. From 2000 to 2018, while the S&P averaged +4.8% per year, our best strategies averaged +56.2% per year.

See their latest picks for free >>

Want the latest recommendations from Zacks Investment Research? Today you can download the 7 best stocks for the next 30 days. Click to get this free report